From heads of terms to a completed section 106

A section 106 agreement completes when every party with an interest in the land has signed, the authority has approved the wording, and the fees are paid. Everything before that is drafting. The reason so many resolutions to grant sit unissued for months is rarely the money in the heads of terms. It is that nobody checked the title early enough to find the lender, the strip of land in different ownership along the access, or the option that gives a third party a registrable interest.

Work backwards from completion and the sequence becomes obvious.

What heads of terms should actually contain

Officers often circulate heads of terms as a list of contributions with figures attached. That is half a document. A useful set states, for each obligation: what is required, in what amount or what works, the trigger for payment or delivery, the index and base date, the period in which the authority must spend the money, and what happens if it does not.

Add the administrative items that get argued about later. The monitoring fee and what it covers. Whether the obligation is site-wide or plot-specific. Whether phases can be released separately. Whether a review mechanism applies and what inputs feed it. Whether affordable housing is to be transferred to a registered provider and on what basis.

Getting all that agreed at heads of terms stage costs one extra meeting. Leaving it to the drafting costs a month per point, because each one has to travel between two sets of solicitors and a case officer who has other applications.

The three tests, applied honestly

Regulation 122 of the Community Infrastructure Levy Regulations 2010 makes three tests statutory where an obligation is taken into account as a reason for granting permission. The obligation must be necessary to make the development acceptable in planning terms. It must be directly related to the development. And it must be fairly and reasonably related in scale and kind to the development.

Necessary is the test that does the work. A contribution towards a facility the scheme's occupants will never use is not necessary. A contribution calculated from a tariff in an old supplementary planning document, applied without asking whether this development creates the need, tends to fail the same test.

The practical move is to ask the authority for the evidence linking each contribution to the development. Where the answer is a formula, ask what the formula is based on and when it was last reviewed. Where the answer is a specific project with a funding gap, that is a strong obligation and it should be named in the deed.

Do not use the three tests as a reason to resist everything. An applicant who disputes every line arrives at completion later and with a worse relationship than one who concedes the well-evidenced items quickly and argues two properly.

Parties, title and mortgagee consent

Order the official copies of the title on the day the application is validated, not when the deed is drafted. Then map every interest against the red line.

Registered proprietors sign. Mortgagees consent, because an obligation does not bind a lender that has not agreed to it, and a lender enforcing its security could otherwise take the land free of the burden. Long leaseholders are joined where their interest is affected. In two-tier areas the county council joins where obligations relate to education, libraries, adult social care or highways within its remit. A registered provider joins where affordable homes transfer directly.

Unregistered land, a ransom strip, an unresolved right of way, a company that has been dissolved: each of these takes weeks to deal with and none of them is visible from the application drawings. This is the single most common cause of a resolution to grant sitting in limbo.

Send the draft to the lender's solicitor in the first circulation. Lenders are slow by nature, not by intent, and their comments are usually limited to a standard consent clause.

Unilateral undertakings compared with agreements

An obligation can be entered into by an agreement between the landowner and the authority, or by a unilateral undertaking executed by the landowner alone. Both are deeds and both bind the land.

The undertaking's advantage is that it does not need the council's signature, so it takes the authority's legal team off the critical path. That matters most at appeal, where an inspector needs the completed obligation before issuing a decision and there is a hard deadline. The unilateral undertaking route is the default in that situation.

Councils sometimes push back on undertakings for larger schemes, because they prefer a document they have settled. Where that happens, offering an undertaking in the authority's own preferred form usually resolves it.

Its disadvantage is that it is one-sided. There is nothing to bind the authority, so anything you want the council to do, such as spending a contribution within a period or refunding it, cannot be secured. For schemes with complex reciprocal obligations, an agreement is the right instrument.

Triggers and indexation

Write triggers as events that can be evidenced, not as descriptions. The start of development, defined by reference to the statutory meaning of material operations, with agreed exclusions for site investigation, demolition and remediation. First occupation of the tenth dwelling. Practical completion certified under the building contract. Each of those can be proved with a document.

Index every sum. Name the index, give the base date, and say how the calculation is done. An unindexed contribution agreed in a deed completed three years before work starts is worth less than the parties intended, and an index with no base date generates its own dispute.

Set a spend period, usually five or ten years, with a refund clause if the money is not spent on the identified purpose. Councils resist this less than applicants expect.

Be careful with triggers tied to occupation on a scheme that will be sold in parts. A trigger expressed as occupation of the tenth dwelling works while one party builds out. Split the site between two housebuilders and nobody can say whose tenth dwelling it is. Where a sale is possible, write the trigger against plot numbers on an annexed plan instead.

Why completion delays decisions

A resolution to grant subject to a section 106 stops the clock in practice but not in law. The statutory determination period keeps running unless an extension of time is agreed in writing, and an application not determined in time is appealable on non-determination, which helps nobody at that stage.

Agree an extension of time in writing when the committee resolves, with a realistic end date, and diarise a review. Then run the title work, the parties and the lender consent in parallel with the drafting rather than after it.

PlanScope drafts the application documents that sit around the deed, from the Planning Statement to the wider evidence base, and you can browse the report types by category to scope what a scheme needs. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval. This is general guidance, not legal advice, so take advice from a solicitor on any deed before relying on it.